Tougher to get housing loans, bank funds dry up

Malaysians are finding it increasingly harder to get housing loans as banks have less money available to lend out, financial expert Gary Chua said today.

Chua, who heads financial education firm Smart Financing, said the housing loan approval rate, which was at least 65 per cent about seven years ago, has been showing a downward trend this year with banks rejecting a higher number of applications.

He said statistics show that the 53 per cent of loan approvals by banks in the first quarter slid to just 47 per cent for residential property loan approvals in the third quarter.

“To me this is one of the key points affecting the market as well, where the banks are tightening their belts and consumers are finding it difficult to get financing from the banks to fund their dream homes, so this would definitely get even tougher moving forward,” he said during PropertyGuru's Property Market Outlook 2016 forum here.

Chua said that banks in Malaysia are suffering from low liquidity as they have lent out most of their money to Malaysians.

“And at the moment, at the industry, it’s over 90 per cent, meaning 90 per cent of the banks’ money have been lent out to consumers. That means banks are having difficulty or stress in terms of getting more money to lend out,” he explained.

“For the banks, mortgage or housing loan is the lowest yielding business to them, hence if they have limited funds to lend out to consumers, housing loans will be the first one that they will pull back,” he said, comparing housing loans to the banks’ products with higher profit margins such as credit cards and car loans.

Chua said first-time house-buyers with monthly incomes of RM5,000 also face challenges in securing loans, as banks impose a 60 per cent lending cap, which means they can only borrow a total of up to RM3,000 per month for items such as credit cards, car loan, mortgages.

Noting that current laws require banks to set aside 4 per cent of their funds and deposit this reserve in Bank Negara Malaysia's accounts, Chua suggested that this figure be brought down as it was done in 1998 and 2008 to enable the banks to have more cash to lend out.

He also said bad loans are at a “historical low” as only 1.2 per cent of borrowers have failed to repay their bank loans.

Developer Datuk Dr Vincent Tiew, who was also on the six-man panel of speakers, said that less banks in Malaysia are giving out loans now as some of them are trying to merge.

Tiew, who is the managing director of Andaman Property Management, said between 35 per cent to 65 per cent of loan applications by his prospective buyers are turned down, which meant his firm would have to approach 16 buyers to sell off 10 units.

He also spoke of the banking industry’s weaker support to the housing industry, where banks would slowly roll out loan approvals in piecemeal fashion for a development even if they had confidence in the project.

Siva Shanker, CEO of property agency PPC International, said it was time for the government to stimulate the property market, noting that past cooling measures to slow down the “mad increase” in property value have been effective and are no longer required. - By Ida Lim (The Malay Mail Online)